Renting an Illegal Unit
What is an illegal, unwarranted, non-conforming, or unpermitted unit?
Illegal units are dwellings that do not have the required Certificate of Occupancy, which is a document that certifies that a residential building complies with all state and local building codes and is safe to live in. An illegal unit is also sometimes referred to as unwarranted, non-conforming, or unpermitted.
Is an illegal unit covered under local rent control ordinances?
Illegal units typically contain many habitability issues and are often rented by elderly, disabled, or low-income tenants. Rent controlled jurisdictions recognize that these units deserve special protection. A tenant who lives in an illegal unit may think that they do not have any rights, but illegal units are in fact covered under local rent control ordinances in most cases. In rent-controlled jurisdictions such as the City of San Francisco, the City of Berkeley, and the City of Oakland, the landlord cannot increase the rent more than the allowable amount, and the tenant cannot be evicted without good cause under the rent ordinance.
How can a tenant tell if their apartment is an illegal unit?
If a tenant resides in an in-law apartment, a backyard cottage, a garage apartment, a granny unit, a basement, or an attic, the unit may be illegal. Other signs that a unit is illegal are that the residence does not have its own address, it does not have its own gas and electric meter, does not have its own mailbox, the ceilings are unusually low, the electrical outlets are ungrounded, or some of the rooms lack windows.
Further, a Certificate of Occupancy is a matter of public record, and a tenant can contact their local Assessor-Recorder office to confirm if there is one recorded for their unit.
Is A Lease for An Illegal, Unpermitted, Or Unwarranted Unit Valid And Enforceable?
Generally, contracts for an illegal purpose, such as a lease agreement for an unpermitted unit, are unlawful and void. But this rule is not absolute. Lauren Carter v. Jerry Cohen, 188 Cal.App.4th 1038, 1048 (2010). Although rental agreements for illegal units are unlawful, tenants can enforce the contract and sue their landlord for their damages based on the principle that when a law’s purpose in prohibiting certain conduct is to protect a class of people from the activities of another, the members of the protected class may maintain an action despite having been a party to the illegal transaction. Id at 1050.
While tenants can enforce the contract, landlords cannot. Specifically, a landlord is not entitled to collect or request rent from the tenant in an unpermitted unit. Gruzen v. Henry, 84 Cal. App. 3d 517, 519 (1978). Tenants in an illegal unit, though, should be aware that they can still be subjected to an attempted eviction. This can happen if the owner is cited by a government agency for having an illegal unit. The tenant may be served with an eviction notice to perform substantial repairs to bring the unit up to code or to demolish the unit, which are both just-cause reasons for eviction under most local rent ordinances.
Not all just-cause reasons for eviction of a tenant in an illegal unit are clear-cut. For example, while nonpayment of rent is a just-cause reason for eviction under the Los Angeles Rent Stabilization Ordinance, the Appellate Division of the Los Angeles Superior Court has held that a three-day pay or quit notice for non-payment of rent served to a tenant living in a unit that did not have Certificate of Occupancy was fatally defective. North 7th Street Associates v. Guillermo Constante, 7 Cal. App. 5th Supp. 1 (2016). The Court reasoned that because a landlord is not entitled to collect rent for an illegal unit, the landlord could not then evict the tenant for nonpayment. Id.
While the case is not binding in the Bay Area, the decision marks a notable shift in how future courts may view tenants’ rights concerning illegal units. For now, tenants in an illegal unit that have been served any type of eviction notice should immediately contact an experienced tenant attorney to discuss their options.
What is the San Francisco Unit Legalization Program?
An owner’s ability to evict their tenant and demolish an illegal unit to remove it from the rental market has contributed to the lack of affordable housing in San Francisco. The City has responded to this issue by passing an ordinance to create the Unit Legalization Program. S.F., Cal., Planning Code § 207.3.
The program allows an owner to apply to legalize one unit per building lot without fear of fines or citations by the Department of Building Inspection (DBI). Id. The owner can begin the initial screening process with the DBI anonymously before formally applying. Id. The following are some of the relevant requirements of the program that tenants should know:
- Only one unit may be legalized per building lot;
- The unit must have existed prior to January 1, 2013;
- Units that have pursued no-fault evictions after March 2014 must wait either 5 years (where there was an Owner Move-In eviction) or 10 years (where there was any other type of no-fault eviction) before they may apply for legalization;
- If the building where the unit is being legalized is subject to the Rent Control Ordinance, the legalized unit shall also be subject to the Rent Control Ordinance;
- The legalized unit cannot be subdivided or condo-converted;
- Capital improvement costs for legalization cannot be passed through to the tenant occupant, and the owner must provide temporary relocation compensation to the tenant occupant if applicable per Rent Board standards;
- Current Notices of Violation shall be suspended if the owner opts to pursue legalization and will be cleared if the unit is legalized within one year. Id.
Although they have not yet established a program like San Francisco’s, other Bay Area cities appear to be following suit in making it easier to legalize unpermitted units. In the past few years—to encourage legalization of units and discourage demolition—both the City of Oakland and the City of Berkeley have begun to relax many of their building requirements for legalizing unpermitted units.
Can a landlord evict a tenant to demolish the illegal unit?
While this is possible, it is not likely. Demolishing the unit usually refers to obtaining permits to remove the bathroom and/or kitchen to render the unit unlivable. Because affordable housing is scarce in the Bay Area, many cities are encouraging owners to legalize their units instead of demolishing and removing them from the rental market.
For example, it is difficult to obtain a demolition permit in the City of San Francisco because an owner must legalize the unit unless it can be shown that it is not feasible to do so. S.F., Cal., Planning Code § 317. Even if the owner can show legalization is not feasible, the permit process also involves a public hearing with the Planning Commission where the occupying tenant can contest the demolition of their home. Obtaining a demolition permit is time consuming, costly for the owner, and unlikely to result in approval from the City.
While demolition permits are difficult to obtain, demolition is a just cause for eviction under most local rent ordinances. If an owner is able to obtain the required permits, under the San Francisco Rent Ordinance, a demolition eviction requires a sixty-day written notice to the tenant, payment of relocation benefits to the tenant, and the landlord must have the demolition permits before the notice is served. The landlord must be evicting in good faith. Bad faith would be any of the following: (1) not demolishing the unit to re-let it at a higher rent, (2) selling the building without demolishing the unit, (3) merging the unit with other units, or (4) retaliating against the tenant after repair requests.
Similar demolition eviction clauses exist in the City of Oakland and the City of Berkeley.
Note that an owner of an illegal unit may also wrongfully attempt to evict a tenant through an Owner Move-In eviction, an Ellis Act eviction, or another just cause reason for eviction. If a tenant receives any type of eviction notice whatsoever, they should immediately contact a tenant attorney to discuss their options.
If the illegal unit is approved for demolition, are tenants entitled to relocation benefits?
If the landlord is able to obtain all the necessary permits to demolish the illegal unit and complies with the eviction notice requirements under the San Francisco Rent Ordinance, the evicted tenant is entitled to relocation benefits in the City of San Francisco. For 2018, the amount due per tenant is $6,627.00, with a maximum relocation amount per unit of $19,881.00. Plus, each elderly or disabled tenant or a household with a minor child is entitled to an additional $4,419.00.
Tenants in the City of Oakland are also entitled to relocation benefits. The amounts due are based on the number of bedrooms in the unit, not per tenant. For 2018, the amount due for a studio or one bedroom is $6,875.58, for a two bedroom is $8,462.26, and for three or more bedrooms is $10,445.60. Also, there is an additional amount of $2,500.00 for households that have elderly or disabled tenants or a minor child.
Currently in the City of Berkeley, relocation benefits under the Rent Stabilization Program are only available to tenants in cases of an Owner Move-In eviction, an Ellis Act eviction, or substantial repairs temporary eviction.
Even if a tenant has accepted relocation benefits and has moved according to a demolition eviction notice, they should still contact a tenant attorney to determine if the landlord acted in bad faith. If the landlord acted in bad faith (i.e. did not follow all the eviction requirements, had an ulterior motive, etc.), the tenant can keep the relocation benefits and also bring a claim against the landlord for wrongful eviction.
Can a tenant be constructively evicted from an illegal unit?
To be considered habitable, rental units—which includes illegal rental units—must have effective waterproofing and weather protection; plumbing, gas, electricity, and electrical wiring and equipment in good working order; hot and cold water; adequate heat; all areas maintained free of garbage, rodents, and vermin; floors, stairways, and railings that are in good repair; and adequate garbage receptacles. Cal. Civ. Code § 1941.1.
A unit remains unpermitted or illegal because it does not meet all of the required building and zoning codes, rendering it uninhabitable. In some circumstances, a tenant may choose to move out of an uninhabitable rental unit rather than attempt to have repairs made. Cal. Civ. Code § 1942. In this situation, the tenant likely has an affirmative case against the landlord and can bring a lawsuit for a constructive eviction. When the property is so defective that it is unfit to live in and the tenant is forced to abandon the property, the tenant can file a cause of action for constructive eviction. Stoiber v. Honeychuck, 101 Cal. App. 3d 903, 921 (1980), citing Groh v. Kover’s Bull Pen, Inc., 221 Cal. App. 2d 611 (1963).
If a tenant is considering moving out of their illegal unit due to habitability issues, they should immediately speak to an experienced tenant attorney before giving the landlord a notice of an intent to vacate. If the tenant has already abandoned the property, a tenant lawyer can advise as to whether the tenant has claims justifying filing a lawsuit against the landlord.
Can a tenant sue their landlord for renting them an illegal unit?
A tenant may have claims against their landlord, such as fraud and misrepresentation, if the landlord represented to the tenant that the unit was legal. If the tenant knew that they were renting an illegal unit, this may undermine their claim for fraud or misrepresentation, but they will still likely have other viable claims against the landlord.
A tenant in an illegal unit may have claims for violation of the rent ordinance, breach of the warranty of habitability, breach of quiet enjoyment, wrongful eviction, constructive eviction, and others.
Some of the damages a tenant may seek to recover in a lawsuit against their landlord are rent that was previously paid to the landlord, out-of-pocket expenses, property damage, payment for emotional suffering, damages for physical harm, treble damages, punitive damages, and future damages. Also, the prevailing party to such a lawsuit may be entitled to attorney fees. Cal. Civ. Code § 1942.4.
Because each cause of action requires the tenant to prove specific elements to recover damages, and each cause of action has a specific statute of limitations (i.e., a time limit for which a lawsuit must be filed or preserved), a tenant should call Tobener Ravenscroft LLC to speak with an experienced tenant rights attorney about their potential claims.